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Utility Week 3rd March 2017

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24 | 3rd - 9th March 2017 | UtILItY WEEK Customers Standard variable tariffs (SVTs) are "actually good value" for consumers, many of whom favour them over fixed price deals, according to the boss of Centrica. Government intervention in the energy market is unneces- sary because the difference between variable and fixed price tariffs has now "collapsed", argued chief executive Iann EnErgY Centrica's Conn: standard variable tariffs are 'good value' Conn as he reported on Cen- trica's full year results. The company posted a 4 per cent rise in its adjusted operat- ing profits in 2016 to £1.5 billion. Earnings from its domestic energy supply business in the UK fell 11 per cent to £553 million. "Standard variable tariffs are not the evil empire," said Conn. "They are actually offering decent energy value". He said the "huge £300 differential" between variable and fixed price tariffs has "collapsed to on aver- age something like £50 to £70". Conn's viewpoint conflicts with many energy market com- mentators who say most custom- ers on SVTs are not getting good value for money. Iain Wright, chair of the busi- ness, energy and industrial strat- egy select committee, has said This week 'Best offers' letter may fail most vulnerable Vulnerable customers on standard variable tariffs may be 'suspicious' of letters from regulator The Ofgem-branded "best offers" letter being trialled as a means of re-engaging energy customers on standard variable tariffs (SVT) will struggle to make an impact on vulnerable customer groups, industry figures have warned. The energy regulator is trial- ling the best offers letter as one of two approaches to the imple- mentation of the Competition and Markets Authority's (CMA's) "sticky customers" database remedy. This seeks to motivate disengaged customers who have been on SVTs for a long time to move on to cheaper deals. Ofgem told Utility Week that the first phase of the database trials will not include "complex" groups, such as financially vulnerable customers, those with disabili- ties or those for whom English is not a first language. Gillian Cooper, head of retail energy markets at Citi- zens Advice, said she supported this approach, but that Ofgem should not make assumptions about the way in which vulnerable customer groups will react to its letters based on results with non-vulnerable customer groups. She added: "Many customers may not have heard of Ofgem or will be suspicious of receiving mail from an energy firm they're not familiar with." "If we get down to 30 to 40 per cent of the market being on SVTs, that is still not OK if all of those custom- ers are the most vulnerable households." Peter Haigh, managing director of council-owned municipal energy supplier Bristol Energy, said "by far the minority" of customers will recognise or relate to the Ofgem brand". He believes that working with councils or other agencies, including charities, to deliver informa- tion might deliver better results, "because that would at least be an entity that customers can relate to". JG EnErgY First Utility raises standard tariff First Utility, the largest inde- pendent energy supplier in the UK, has raised its standard vari- able tariff by 9.7 per cent. This will add £8.80 a month to bills, although First Utility stressed that only 13 per cent of its 900,000 customers will be effected. The supplier said "the costs of buying energy and meeting policy-cost obligations such as the smart meter programme has increased by 22 per cent" compared with last year. "While the company will absorb a sizeable proportion of these costs, First Utility will reluctantly have to pass some on to customers." First Utility issued a break- down of its external cost pres- sures which showed wholesale gas and electricity prices – which make up 40 per cent of a customer's bill – had increased by 42 per cent year-on-year. gas NGGD singled out for service failures National Grid Gas Distribution (NGGD) is the only gas distribu- tion network (GDN) that failed to meet its customer satisfaction targets in 2015/16, according to an Ofgem report. In an annual summary of net- work performance against regula- tory performance measurements for the RIIO regulatory frame- work, Ofgem said "all GDNs met their annual output targets in 2015/16, with the exception of the four National Grid GDNs, which did not meet all of their customer satisfaction targets." National Grid received a service failure penalty of £1.6 million for this shortfall in 2016, before it sold its NGGD business to a consortium of investors. The gas distributor's short- comings were specifically related to its "target scores on custom- ers' views on planned inter- ruptions and on connections," Ofgem said. "Ultimately", NDDG was penalised "because customers didn't think they provided good enough service". WatEr Inaccurate data may hit water switchers The water retail market must clean up its data before market opening later this year to avoid problems with customer switch- ing, a company director has told Utility Week. SES Business Water sales director Bill Clarke said: "[Cus- tomers know] from the energy side how data has caused them so much in the way of problems in processing and switching." He said the market has a data accuracy issue, and warned that with 25 water retailers adding data on 2.4 million water and wastewater supplies in the Central Market Operating System (CMOS), switching errors are very likely. 'Sticky' customers are missing out customers on SVTs are locked into an "abusive relationship" with their energy suppliers. "It's true a lot of people are saying standard variable tariffs are bad news," Conn conceded. "It sells newspapers. But actu- ally, standard variable tariffs are what a lot of people are on… Our market feedback says a lot of people find them attractive. Eve- ryone is aware they can switch."

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